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Hess Corporation (NYSE:HES) On The Verge Of Breaking Even

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With the business potentially at an important milestone, we thought we'd take a closer look at Hess Corporation's (NYSE:HES) future prospects. Hess Corporation, an exploration and production company, explores, develops, produces, purchases, transports, and sells crude oil, natural gas liquids (NGLs), and natural gas. With the latest financial year loss of US$3.1b and a trailing-twelve-month loss of US$161m, the US$23b market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Hess' path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Hess

According to the 16 industry analysts covering Hess, the consensus is that breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of US$488m in 2021. So, the company is predicted to breakeven approximately 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 41%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

Given this is a high-level overview, we won’t go into details of Hess' upcoming projects, though, bear in mind that generally an energy business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we would like to bring into light with Hess is its debt-to-equity ratio of 126%. Typically, debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are key fundamentals of Hess which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Hess, take a look at Hess' company page on Simply Wall St. We've also put together a list of relevant factors you should look at:

  1. Valuation: What is Hess worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Hess is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Hess’s board and the CEO’s background.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.